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Digital technology drives energy pricing

We will be looking at the effect of digital technologies on energy models and pricing for businesses and homes at our City Hall, London forum in June.

EY says that energy companies need to work out what drives their customers, build business models to match, but be flexible enough to adapt to their evolving expectations.

Energy companies, EY's Benoit Laclau says, are used to charging customers to recover the costs of building, owning and operating assets that generate and deliver electricity. It is a simple model, he observes, which has meant they haven't had to think about serving their customers in a particularly sophisticated way.

Now digital technologies and increased competition from both inside and outside the sector are creating a more distributed, inclusive marketplace, he warns, and says that individuals, businesses and communities, spurred by the availability of smart devices and low-cost renewables, are exploring ways to optimize consumption, source greener energy and manage their energy bills more efficiently.

EY states that with the cost of distributed generation and battery technologies continuing to fall, empowered customers are finding it feasible to pull the plug on traditional energy companies in favour of generating, storing and selling their own power.

According to the International Renewable Energy Agency (IRENA) EY says, solar photovoltaic (PV) prices declined by 90% between 2009 and 2018 and earlier around 2015, the cost of installing small-scale battery storage systems fell by 60% in some regions. These trends are expected to continue over the next decade, with self-generating power reaching cost parity with grid-delivered electricity as early as 2021. This puts the possibility of grid independence within reach of even more consumers.

Over time, EY advises, energy companies will need to morph from energy providers to energy service providers; taking the data available from smart meters and digital technologies to inform new products, services and customer experiences to deepen their own value pool.

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